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Time dependent cross correlations between different stock returns: A directed network of influence

L. Kullmann·J. Kertesz·K. Kaski
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Abstract

We study the time dependent cross correlations of stock returns, i.e. we measure the correlation as the function of the time shift between pairs of stock return time series using tick-by-tick data. We find a weak but significant effect showing that in many cases the maximum correlation is at nonzero time shift indicating directions of influence between the companies. Due to the weakness of the effect and the shortness of the characteristic time (in the order of a few minutes) the effect is compatible with market efficiency. The interaction of companies defines a directed network of influence.

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L. Kullmann, J. Kertesz, K. Kaski. 2002-05-28. Time dependent cross correlations between different stock returns: A directed network of influence. https://doi.org/10.1103/physreve.66.026125

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